UVW Group is undertaking a 4-year project in Japan with an initial cost of USD 30 Million. It expects annual OCF of JPY 1.2 Billion but no Salvage Value in year 4. The Required Return is 12%.

UVW will fund the project with a combination of US-sourced funds and a loan from a Japanese bank in the amount of JPY 1 Billion, to be paid back in 4 equal annual installments of JPY 275 Million.

UVW projects a steady exchange rate of JPY 100 / USD.

What is the EAR of the JPY-denominated loan?

Group of answer choices:

A) 0%

B) 3.92%

C) 8.08%

D) 27.5%